Once again Indian Government is in dilemma for allowing FDI
in multi brand retail sector. On one hand opening up of one
of the world's largest market for retail trade will meet the
huge funding needs of this emerging sector in order to
provide dynamism and efficiency in the system along with
strengthening the back end infrastructure and on the other
hand it may put millions of Kirana stores (Mom n Pop Stores)
and pushcart vendors out of the business and will lead to
unemployment.

Certainly, Govt's this step will boost the growth of retail
industry in India currently valued at $450 billion and
expected to reach at $640 billions by 2015. However
organized retail constitutes a small 4 % of total retail
sector and is likely to grow at a much faster pace of 45-50
% per annum and quadruple its share in total retail trade to
16 % by 2011-12. Development of new cold chains and back-end
infrastructure could generate new employment and prevent
further losses of fruit, vegetables and agricultural produce
worth Rs 1,00,000 crore every year. But on counter part it
could affect badly on unorganized retail sectors consist of
more than 15 million Kirana type stores which has created
nearly 39 million (nearly 9.2 % of country’s population)
employment opportunities in the country.

It has been seen in past that significant nos. of Kirana
type store has been shut after opening door for FDI in
retail sector. However the rate of closure was 1.7 per cent
on account of competition from organized retail which is
much lower than the international rate of closure of small
retailers. There are fair chances that this rate may
increase if FDI is allowed in multi brand retailing. But it
does not mean that Kirana type retailers should start
protesting Government’s positive step of allowing FDI in
multi brand retailing. Instead they should now start
focusing on strengthening their position by creating
competitive advantage against organized retailing.

There are mainly 4 factors influencing customers in
selecting retail store, these are; price, product range,
convenience and experience. However price is the main factor
for attracting and retaining consumers. Organized retail
stores have competitive advantage in terms of price, range
and experience as they have strong bargaining power due to
bulk purchase, good infrastructure for storage and product
display and can manage to deliver good customer experience.
Whereas kirana stores have competitive advantage of
convenience as most Indian consumer purchases daily and
prefer to shop from corner stores. In addition to this,
kirana stores have significant competitive strengths
including consumer goodwill, credit sales, amenability to
bargaining, ability to sell loose items, convenient timings,
and home delivery.

Considering price as a key factor for Indian consumers in
selecting retail store, Kirana stores should mainly focus on
building their capabilities in offering competitive price as
compare to big retail chain store. Big retail chain stores
have strong bargaining power as buying in bulk, offers huge
discount and such a low selling price on grocery and other
lifestyle products that Kirana stores can not offer.

Now its time for unorganized retailers to think seriously on
pricing issue and this may possible if new association of
such Kirana type stores is being formed city wise and
existing associations take initiatives with an objective to
strengthen their bargaining power by directly purchasing
from supplier and farmers. An association of 1000 stores can
easily control a supplier company in terms of price and
other business terms. Also companies can not take risk to
fight with such associations who can even boycott them in
case face injustice for such issues. Also association can
play important role in improving performance and skill of
Kirana stores as well as protecting consumer rights.

An example of Rajkot Engineering Association (REA) will
throw more light on benefit of such initiatives by existing
and newly formed association. REA is association of more
than 1100 small and medium size foundries and other
engineering industries in Rajkot which purchases more than
15000 MT of pig iron (raw material for foundries) every year
in bulk for their members at 5-6% lower cost than market.
This way they have succeeded to manage cost effectiveness of
Rajkot's foundry industries which is backbone of fast and
consistently growing Rajkot’s engineering cluster. Other
association like National Association of Retail Grocer
Australia (NARGA) and Small retailer association of Crotia
had initiated same way in competing with organized retail
specifically for price factor. Recently The Nagpur Itwari
Kirana Merchant Association has also taken such initiative
on procuring directly from supplier and farmers which
indicates that the unorganized retail players are now
preparing themselves to fight against coming situation.

If this strategy is being successfully implemented by such
association with support of Govt. and industry experts, It
will not take much time to convert unorganized retailing in
to fully organized retail sector.